A new report by a leading consumer advocacy group's director of research has determined that there is no justification for removing the tax exemption currently in place for all credit unions.
The report, written by Dr. Mark Cooper, Director of Research for the Consumer Federation of America, was funded by the Florida league. It concludes its lengthy examination by suggesting that "the benefits credit unions provide to society as a whole, far out weigh the cost of the tax exemption they receive and serve a specific purpose."
The report follows a separate analysis released earlier this year and conducted by Florida TaxWatch that questioned whether the exemption could be justified.
In his study, Cooper called the TaxWatch examination "one-sided in its treatment of credit unions and presents an extremely distorted view that could have the impact of misleading policymakers who must establish sound fiscal tax policies."
Cooper writes that it is "absurd" to suggest that four-million Floridians and 84-million Americans have joined credit unions because of a tax exemption that, averaged out, is worth $25 to each member.
He further suggests that there is no basis to claim that the tax exemption creates the basis for unfair competition between credit unions and banks. Cooper states that the value of tax breaks enjoyed by small banks in the form of S-corporations, Trust Preferred Securities, loan loss forgiveness, and other tax exemptions alone are about equal the value of credit union tax exemptions for all credit unions.
Cooper further argues that the claim made by TaxWatch that "substantial" tax revenue could be raised by eliminating the tax exemption is incorrect. Since 70% of the "tax losses" are in the federal, not the state jurisdiction, only about $30-million would actually be within the purview of the state.
"If the exemption were lifted," wrote Cooper, "credit unions would take measures to reduce their income, thereby reducing any tax liability."
Cooper concluded that "from a societal point of view, credit unions provide an important institutional alternative for consumers. Not only do they deliver benefits to their members, but also their competitive activities discipline the behavior of banks." Cooper also suggested that altering the tax treatment of credit unions would change the fundamental nature of credit unions.
